Tax Rate Changes 

Income Tax Rates and Allowances 

Allowances 2017/18 2016/17
Personal Allowance (PA)* †
£11,500 £11,000
Blind Person's Allowance 2,320 2,290
 
Allowed only at 10%    
Married Couple's Allowance  (born before 6/4/35) **
8,445* 8,355

Income limit for age-related allowances

28,000 27,000
Dividend and Savings Allowances
Dividend Tax Allowance (DTA)
5,000 5,000
Personal Savings Allowance (basic rate taxpayer) 
1,000 1,000
Personal Savings Allowance (higher rate taxpayer) 
500 500

*Personal Allowance (PA) will be withdrawn at £1 for every £2 by which ‘adjusted income’ exceeds £100,000. There will therefore be no allowance given if adjusted income is £123,000 or more (2016/17: £122,000).

†10% of the PA (2017/18: £1,150; 2016/17: £1,100) can be transferred to a spouse or civil partner who is no more than a basic rate taxpayer, where both spouses were born after 5 April 1935.

**Married Couple’s Allowance is reduced by £1 for every £2 by which adjusted income exceeds the income limit, down to a minimum of £3,260 (2016/17: £3,220).

§The DTA taxes the first £5,000 of dividend income at nil rather than the rate that would otherwise apply – see rates below. The Personal Savings Allowance operates in a similar way for savings income (e.g. interest), but varies according to the level of the taxpayer’s total income.

Rate Bands 2017/18 2016/17
Basic rate band (BRB) 33,500 32,000
Higher rate band £33,501-£150,000 
32,001-150,000
Additional rate over 150,000 over 150,000

Tax Rates

Rates differ for General, Savings and Dividend income within each band:

  G S D
Basic 20% 20% 7.5%
Higher 40% 40% 32.5%
Additional 45% 45% 38.1%

General income (salary, pensions, business profits, rent) uses personal allowance, basic rate and higher rate bands before savings income (interest). To the extent that savings income falls in the first £5,000 of the basic rate band, it is taxed at nil rather than 20%.

Dividends are taxed as the ‘top slice’ of income.


Tax Efficient Investments

Annual limits 2017/18 2016/17
Individual Savings Accounts (ISA) £20,000 £15,240
Junior ISA 4,128 4,080
Child Trust Fund 4,128 4,080
No changes announced for investment limits in:
Enterprise Investment Scheme 1,000,000 1,000,000
Venture Capital Trust 200,000 200,000
Seed Enterprise Investment Scheme 100,000 100,000
Registered Pension Schemes
General limit *† 40,000 *† 40,000
Reduced limit ** 4,000 ** 10,000

* or 100% of earnings (if lower): in some circumstances unused relief of the previous 3 years can justify current contributions.

† Where income (including pension contributions) exceeds £150,000, the allowance may be tapered by £1 for every £2 of excess income, down to a minimum of £10,000.

**for individuals who have flexibly accessed a pension from 6 April 2015.


Child Benefit

Rates 2017/18 2016/17
First child rate £20.70 £20.70
Rate for additional children 13.70 13.70

National Insurance Contributions

Rates and limits for 2017/18

Class 1 Employee Employer
Main NIC rate 12% 13.8%
No NIC on first £157pw £157pw
Main rate charged up to £866pw no limit*
2% rate on earnings above £866pw N/A
Employment allowance per qualifying business N/A £3,000

* Nil rate of employer NIC for employees under the age of 21, or apprentices aged under 25, applies up to £866pw. The main rate applies above this threshold.

Employer contributions (at 13.8%) are also due on most taxable benefits (Class 1A) and on tax paid on an employee’s behalf under a PAYE settlement agreement (Class 1B).

Class 2 (Self employed)
Flat rate per week N/A £2.85
Small profits threshold N/A £6,025
Class 3 (Voluntary)
Flat rate per week N/A £14.25
Class 4 (Self employed)
On profits £8,164 – £45,000 N/A 9.0%
On profits over £45,000 N/A 2.0%

Employee Vehicle Benefits

Rates and limits for 2017/18

2017/18 2016/17
Car fuel benefit multiplier £22,600 £22,200
Van fuel benefit 610 598
Van benefit charge 3,230 3,170

Working and Child Tax Credit

Rates and thresholds 2017/18 2016/17
Working Tax Credit
Basic element £1,960 £1,960

Working and Child Tax Credit

Rates and thresholds 2017/18 2016/17
Working Tax Credit
Basic element £1,960 £1,960
Couple and lone parent element 2,010 2,010
30 hour element 810 810
Disabled worker element 3,000 2,970
Severe disability element 1,290 1,275
Childcare element
maximum eligible cost for one child £175 per week £175 per week
maximum eligible cost for two or more children £300 per week £300 per week
percentage of eligible costs covered 70% 70%
Child Tax Credit
Family element £545 £545
Child element 2,780 2,780
Disabled child element 3,175 3,140
Severely disabled child element 1,290 1,275
Income thresholds and withdrawal rates
Income threshold £6,420 £6,420
Withdrawal rate 41% 41%
Income threshold for those entitled to Child Tax Credit only 16,105 16,105
Income rise disregard 2,500 2,500
Income fall disregard 2,500 2,500